During a Period of Falling Prices, Which of the Following

question 137

Multiple Choice

During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory?

• A) average cost method
• B) LIFO method
• C) FIFO method
• D) cannot tell without more information

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Definitions:

Compute

The process of using mathematical and logical operations to perform tasks and solve problems by a computer.

Average Accounting Return

The average accounting return is a financial ratio that represents the average annual accounting profit compared to the initial investment.

IRR

Internal Rate of Return, a financial metric used to estimate the profitability of potential investments by finding the interest rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Projects

Specific tasks or programs undertaken to achieve a goal, often characterized by defined scope, resources, and timeframe.